|News||Crude opens the week bearish due to pressures from supply woes|
|Analysis||Crude oil started its week off soft on growing concerns regarding excess supply in the market. The market is fragile and jittery, since most equities in Asia ended lower and the dollar gaining grounds, where commodities did not have a lucrative appeal providing a window of doubt to sink in triggering the correction.|
Investors started the weak off with worries over further Chinese monetary tightening and further steps towards cool the economy to prevent bubble formations and stave off inflation. Such a move from China, is likely to erode and weakened demand on Oil, especially after the IEA’s new projections assured that rising demand this year is to be fueled by Asian emerging nations, especially China.
The dollar was trading slightly higher by the end of the Asian session, with Europe entering the market, the euro weakened further. The single 16-nation currency is to continue trading with volatility within those two days, and so far with a downside bias as the euro finance ministers start the two-day meeting today to whittle a Greek bailout.
Nonetheless, rumors and news are surfacing the market again regarding an EU disagreement over the bailout package for Greece; some assessing that they are good on their own and too early to discuss a lifeline, while others looking for further guarantees and fear the package will trigger a new wave of help seeking for other nations.
Markets are jittery and investors are hesitant over heading towards crude oil, with an instable outlook and dollar exchange rate, alongside volatile performance from equities. OPEC's meeting this week on March 17, is expected to keep the production quota steady. Though the downside pressure on crude was felt, following comments from Iran’s OPEC governor Mohammad Ali Khatibi that the market might be oversupplied later this year if the group fails to meet its output limits.
Meanwhile, we expect OPEC to keep its quota unchanged and pledge commitment to the limit to drain excess inventories across consuming nations, which we believe will keep oil biased to the upside. Oil is very sensitive to economic data and equity movement nowadays; where last Friday it managed to hit the peak around $83.10 on upside revision to demand expectations from the IEA to reverse lower closing at $81.20 down 1.1%, after the unexpected drop in U.S Michigan sentiment.
Crude is still very volatile and we believe that investors worries over Greece, the mixed economic data, and OPEC meeting on the queue are to intensify fluctuations might provide a downside bias if pessimism prevails; yet, our overall outlook remains still bullish. Crude contracts opened trading today at $81.10 setting the low so far at $80.70 and rising off to currently trade around opening areas.